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One of the goals in concluding a comprehensive land claim agreement was to promote economic development within the Inuvialuit Settlement Region (ISR) and to ensure that the benefits of any development accrue to Inuvialuit. The idea that Inuvialuit should be an influential force in all activities in the ISR was a principal motivating factor for the negotiators of the claim. Having had the experience of the first exploration boom in the Beaufort Delta Region, which happened with little Inuvialuit participation, the Inuvialuit Final Agreement (IFA) negotiators sought to achieve comprehensive involvement in the assessment, planning and benefits arising from future development activities.
Economic Goals of the Claim
Education of individuals and the development of business capacity are fundamental objectives of Inuvialuit. The IFA states in Section 1:
"The basic goals expressed by the Inuvialuit and recognized by Canada in concluding this Agreement are...to enable Inuvialuit to be equal and meaningful participants in the northern and national economy and society..."
Access to Inuvialuit Land
The IFA recognizes that Inuvialuit ownership of land provides one means of achieving economic objectives. The conditions of commercial access to Inuvialuit lands are described in section 7.18¹ and require a Participation Agreement. Section 10 concerning participation agreements specifically allows the imposition of conditions to benefit Inuvialuit businesses on holders of crown rights seeking access to or over Inuvialuit land.
“Section 10.3: The Inuvialuit Land Administration shall have the right to negotiate with the developer/applicant…a participation Agreement that may include specific terms and conditions respecting the nature and magnitude of the land use for which the access is being sought. Without limiting their generality, the terms and conditions may also include:
(c) employment, service and supply contracts;…”
The co-operation and benefits agreements in relation to petroleum and natural gas exploration derive from both Section 10 and Section 16.(12) of the IFA. These agreements have been accepted by Indian and Northern Affairs Canada (INAC) as the northern benefits plan required as a precondition to the grant of exploration permits in relation to crown petroleum rights.
“16 (12): The Inuvialuit Land Administration and the holders of rights on Inuvialuit lands may voluntarily conclude cooperation agreements with regard to the objectives referred to in subsection (11)² and other such matters as they consider appropriate. To the extent that those agreements conform with government requirements, the government may accept them as sufficient to satisfy its approval process.”
Priority Access for Inuvialuit Business
It has been recognized by IRC that in order for the Inuvialuit businesses to develop and participate meaningfully in economic development activities in the region, Inuvialuit must have access to the opportunities as they arise. To this end cooperation agreements, participation agreements, access agreements and permits issued by Inuvialuit Land Administration (ILA) can establish priority access to procurement initiatives for Inuvialuit businesses. Priority access to economic opportunity offers a distinct advantage in the contracting process.
The objective for which the priority was established is the growth in participation and capacity of Inuvialuit in the business community. In order to achieve this objective it is important in reviewing applications for listing as an Inuvialuit business that criteria be applied to ensure that the applicant has substantive business capacity in the area for which listing is sought. The same consideration applies for businesses already on the list wishing to offer additional goods or services. Merely providing an Inuvialuit mask to give a non-Inuvialuit business priority access to contracting opportunities does not build Inuvialuit capacity. There must be a substantive Inuvialuit aspect to the business.
The list of Inuvialuit Businesses referred to both in the ILA Rules and Procedures (Rules) and in the cooperation and benefit agreements concluded with petroleum exploration companies active in the ISR is maintained by the Cooperation and Benefits Agreement Manager.
The basic criterion for inclusion on the list is majority Inuvialuit ownership of the business. The Rules provide some guidelines in furtherance of the basic objectives. The relevant section of the Rules reads:
“24 (4): In evaluating the Application or the Proposal for a Participation Agreement, the Administrator and/or the ILAC shall evaluate favorably, those contracts which have the following characteristics:
(a) high degree of Inuvialuit ownership in the Inuvialuit businesses,
(b) participation by other native corporations or individuals, where such other corporations provide the Inuvialuit with opportunities, outside the Western Arctic region, strengthening native commercial corporations, or where such corporations contribute capital or management expertise,
(c) high degree of Inuvialuit employment, and
(d) significant management role for Inuvialuit.”
“24 (5) In making the evaluation pursuant to subsection 24(4) above, the administrator and/or the ILAC shall consider unfavorably any service or supply contracts obtained by Inuvialuit where the Inuvialuit Business merely acts as agent, or intermediary, or where the Inuvialuit business participates on the basis of a small minority interest in exchange for political support for the project or representational activities.”
Inuvialuit Business Criteria
In order to entered upon the list of Inuvialuit businesses, more than 50% of the business enterprise must be owned by Inuvialuit. This is a precondition to further consideration (except in the case of IDC sponsored businesses where 50% is sufficient).
Applications will be reviewed to determine legitimacy and whether the business contributes to the fulfillment of the goal of developing Inuvialuit capacity. Applications will also be reviewed to determine the legitimacy of the business activity for which listing is sought.
In an effort to assist those businesses wishing to achieve inclusion on the list of Inuvialuit Businesses, the following factors will be considered in determining whether an applicant will be successful:
- Business Capacity – the enterprise must have the ability to provide substantive elements of the service for which listing is sought. It is not the intention of IRC to limit the methods used by business to provide additional capacity within existing fields of service or to limit expansion into new service areas. Product or service lines which are offered through an Inuvialuit business but which are substantially supplied by a non-Inuvialuit business will be closely scrutinized. If the Inuvialuit business merely provides a label of convenience, the application will be rejected. Providing ancillary services which would have to be sought from Inuvialuit businesses in any event are not alone sufficient since it does nothing to increase capacity.
- Business Presence – the business must have some establishment suitable to its nature. In appropriate circumstances this may mean an office with staff capable of providing substantive support services for the conduct of the business.
- Employment – employees (Inuvialuit and non-Inuvialuit are indicators of business capacity. While not determinative the business should be able to supply with at least some of its own workforce.
- Management – the direction and mind of the business is an important element in establishing legitimacy. The extent to which the business sector for which listing is sought is directed by internal management will be weighed in reaching the decision.
Once the ownership criterion is satisfied, all other considerations speak to the capacity of the business to provide the service for which it has applied to be listed. IRC has no intention of directing how businesses are to be structured. IRC is concerned that businesses listed and services provided are legitimate and that they contribute to achieving Inuvialuit participation and capacity and the goals for which the IFA was pursued.
It is recognized that the development of new businesses is a process and that businesses will not have total capacity from the start. Where the applicant is a new business or is embarking upon the provision of services not previously provided, the applicant will be required to submit a written business plan detailing how the business intends to develop capacity. There must be initial resources devoted to the business and at no stage will a mere ‘pass through’ or re-labeling be permitted.
The business will be monitored over time and will be subject to de-listing if it fails to meet the milestones contained in its business plan.
The review of all applications for inclusion on the list of Inuvialuit businesses will be conducted by the Co-operation and Benefits Agreements Manager (Officer). The individual shall make a determination of eligibility and add those businesses approved to the list in those business categories where the Officer is satisfied that the applicant has met the criteria for inclusion.
The Officer shall have responsibility for monitoring the business plan of those businesses required to meet milestones in the development of capacity to ensure that the commitments are met. In the event of a failure to fulfill the commitments, the Officer shall remove the business from the list.
The Officer shall conduct a complete review of all entries on the list at the date of adoption of this policy to determine eligibility in accordance with the criteria. Listed companies may be asked to submit additional to support listings for certain categories of business. If companies cannot meet the criteria for the business listed then the Officer shall remove the entry from the list.
In all cases where an applicant is dissatisfied with the Officer’s decision, an appeal would lie to a 3-member appeal committee appointed by the IRC Board.
Approved by the IRC Board of Directors, on August 30, 2000.